Ascension reports operating improvement, investment returns lag

Ascension, one of the largest not-for-profit health systems in the country, reported an improvement in its operating margin in its fiscal second quarter.

The St. Louis-based system saw a 5.6% increase in outpatient visits during the first half of its fiscal 2015, while discharges were essentially flat. Emergency room visits increased 5.5%. Ascension's fiscal year starts July 1.

For the quarter ended Dec. 31, Ascension recorded an operating surplus of $279.8 million on $5.3 billion in revenue for an operating margin of 5.3%. In the prior-year period, its operating surplus was $207.1 million on $5.1 billion in revenue, for an operating margin of 4.1%.

However, volatility in the global investment markets dragged down its returns, resulting in a lower bottom line year over year. The system has a sophisticated investment strategy that has provided a financial, non-operating cushion in years past, but it is not alone in seeing its returns dwindle in recent months.

Ascension is maintaining a long-term view of its investment approach, a spokeswoman said in an e-mail.

The system ended its second quarter with a net surplus of $114.8 million compared with the comparable year-ago period's $571.4 million.

Ascension, which operates in 23 states and the District of Columbia, reported that self-pay patients accounted for 3% of its revenue in the six months ended Dec. 31, compared with 4% in the first half of its fiscal 2014.

Its earnings report, however, showed that it provided less traditional charity care and instead pumped funds into other community benefit and assistance programs for people living in poverty. Ascension increased the amount it spent on the latter programs—including services for the homeless, substance abusers and people with AIDS—by 25.1% even as spending on traditional charity care for the uninsured decreased 16.9%.

“We had an improved second quarter with a solid recurring operating margin, allowing us to increase our overall care to persons living in poverty and other community benefits,” Ascension's chief communications officer, Nick Ragone, said in a statement.